Zeev's Turnips Patch-No Politics (ZEEV)

[Elroy Jetson]

You claim to believe the people in our country are scared to death of another Depression.

If so, they were foolish to permit the Federal Reserve to expand the money supply since 1996 in such a profilgate manner in order to "stabilize prices" during a deflationary period. This created a stock market bubble.

The Fed is trying to treat the aftermath of this bubble with more money creation which has created a real estate bubble and a bond bubble. The proposed cure for these bubbles will be no doubt be even more money creation resulting in . . . I suppose we'll all find out.

A policy aiming at monetary stability will secure a relative stability of prices, but the economic history of the 1920's teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation. -- Charles Rist - 1946

The correct policy solution for a bubble is to let it unfold. An even better solution is not to develop one in the first place through excess monetary creation during a deflationary period.